Belated Allegation Of Coercion Cannot Justify GST Refund After Voluntary Payment: Gujarat High Court

The Gujarat High Court on 25 June held that a taxpayer cannot claim a refund of GST, interest and penalty voluntarily paid during search proceedings by alleging coercion nearly two years later, ruling that the belated allegation was merely an afterthought to secure a refund and that the delayed issuance of Form GST DRC-04 acknowledging the voluntary payment did not invalidate the proceedings.

A Division Bench of Justices A.S. Supehia and Vaibhavi D. Nanavati dismissed the writ petition filed by the proprietor of Alpha-1 Tuition Classes and Hostel challenging the rejection of his refund claim of Rs. 1.96 crore under Section 54 of the Gujarat Goods and Services Tax Act, 2017. The Bench observed:

“The conduct of the petitioner during the search proceedings, which went from 06.10.2023 till 10.10.2023, and subsequently demonstrates that he has alleged coercive recovery of tax by the GST Officials as an afterthought in order to claim refund.”

The proprietor of Alpha-1 Tuition Classes and Hostel challenged the rejection of his refund application, contending that GST authorities had recovered the amount under duress during the search.

GST authorities conducted a search between 6 October 2023 and 10 October 2023. During the search, they seized documents, recorded statements and accepted payment of Rs. 1.96 crore towards tax, interest and penalty through a temporary GST registration. Nearly two years later, the petitioner applied for a refund, alleging that the authorities had extracted the payment through threats and coercion.

The petitioner further argued that the authorities rejected his refund application without initiating proceedings under Sections 73 or 74 of the Gujarat Goods and Services Tax Act, 2017 (which provide for determination of tax not paid, short paid or wrongly availed input tax credit). He also contended that the authorities issued Form GST DRC-04 almost two years after he made the payment, rendering the proceedings illegal.

The State argued that the panchnamas and statements recorded during the search clearly showed that the petitioner had voluntarily admitted his tax liability, requested a temporary GST registration to make the payment and never complained of coercion until he filed the refund application nearly two years later.

Accepting the State's submissions, the High Court found that the petitioner had admitted collecting fees partly in cash without obtaining GST registration, accepted the quantified tax liability and expressly stated that he had made his statement voluntarily without any pressure, threat or coercion.

The Court held that these contemporaneous records completely undermined his allegation of coercive recovery. On the issue of delayed issuance of Form GST DRC-04, the Bench observed:

“The issuance of FORM DRC 04 under Rule 142 of GST Rules, is an acknowledgment of voluntary payment of outstanding tax liability. There is no specific time limit provided under the Rules for issuance of DRC 04.”

Further, the Court held that Section 54 of the Act permits a refund only where tax was not payable or where the taxpayer paid tax in excess. It also noted that the petitioner had chosen to seek a decision on merits instead of availing the statutory appellate remedy under Section 107 of the Act.

Accordingly, the High Court dismissed the writ petition, holding that the petitioner had voluntarily discharged his admitted tax liability and failed to establish any entitlement to a refund.

For Petitioner: Mr. Ashutosh S. Dave, Advocate

For Respondent: Ms. Tanushree Shrimal, AGP